Correlation Between Visa and Jindal Stainless

Can any of the company-specific risk be diversified away by investing in both Visa and Jindal Stainless at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Visa and Jindal Stainless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Class A and Jindal Stainless Limited, you can compare the effects of market volatilities on Visa and Jindal Stainless and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Visa with a short position of Jindal Stainless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Jindal Stainless.

Diversification Opportunities for Visa and Jindal Stainless

0.28

Correlation Coefficient

Visa  Jindal Stainless

Modest diversification

The 3 months correlation between Visa and Jindal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless and Visa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Visa Class A are associated (or correlated) with Jindal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Stainless has no effect on the direction of Visa i.e., Visa and Jindal Stainless go up and down completely randomly.

Pair Corralation between Visa and Jindal Stainless

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than Jindal Stainless. However, Visa Class A is 1.78 times less risky than Jindal Stainless. It trades about 0.21 of its potential returns per unit of risk. Jindal Stainless Limited is currently generating about -0.03 per unit of risk. If you would invest  28,365  in Visa Class A on October 26, 2024 and sell it today you would earn a total of  3,991  from holding Visa Class A or generate 14.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  Jindal Stainless Limited

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Stainless Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jindal Stainless is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Jindal Stainless

The main advantage of trading using opposite Visa and Jindal Stainless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Jindal Stainless can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Jindal Stainless will offset losses from the drop in Jindal Stainless' long position.

The idea behind Visa Class A and Jindal Stainless Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.